How do you value a company if you don’t know what the company will look like?
It seems a fair question to ask of the technology sector as 2019 draws to a close.
As has been widely reported, there are several investigations, from a number of interested parties, underway and already brewing, into the inner workings of Big Tech.
As of this writing, the NASDAQ is up 36 percent; and as The Wall Street Journal reported, the Standard & Poor’s tech sector gain stands at 41 percent, outpacing the broader S&P’s 25 percent gain. As a group, the technology sector is on pace to notch its biggest gain in a decade. At a recent $199, Facebook is roughly 44 percent higher than it was at the beginning of the year. Google, at $1,314, is about 23 percent than at 2019’s dawn. Amazon trails, at about 7 percent higher.
The broad brush of enthusiasm for tech stocks, as a group, might be traced to long-term growth prospects. But we note that at least some bit of caution might be warranted headed into the new year. Wall Street, as the old saying goes, hates uncertainty.
And regulators, along with policymakers, tend to bring an uncertainty when it comes to growth prospects. Carve up a company, and you bring earnings engines into new buckets, after a fashion. The idea that Apple or Facebook or Google might be split up among various operating units (and those units, potentially, brought to Wall Street as separate trading vehicles) is within the realm of possibility.
Consider that last month, as reported in The Wall Street Journal, Makan Delrahim, head of the Justice Department antitrust division, said such breakups might be “perfectly on the table.”
Separately, as a precursor to any breakups (should such corporate events start to be in the offing), or to none at all, the range of investigations and hearings into business practices may spawn fines and mandates to change how business is done. That might be the case even if companies like Google and others are allowed to maintain a presence across, say, search, advertising and media.
This afternoon (Nov. 19), representatives of Google, Facebook, Apple and Amazon appeared before the House of Representatives Judiciary Committee to defend their approaches to competition across any number of landscapes. Google, for example, said that its services are not favored over peers, as Reuters reported. Amazon has said that aggregated data is collected only for “business purposes” but that the data is not used to bring private label products to market.
Meanwhile, as reported just this week, the Justice Department may widen its antitrust investigations. The Federal Trade Commission has said that multiple investigations into platform firms are underway beyond those centered on Facebook — but those probes have yet to be identified.
All of this points to headline risk, if not the more concrete risk that the companies so enamored today among the NASDAQ boosters may look drastically different in the future — raising the possibility that 2019 may seem like a halcyon year for investors.